Charles Schwab vs. TradeKing: Top Online Brokerages

By Jordan Wathen Markets Fool.com

Once you've mastered the basics of personal finance, investing for the future may be the next logical step. But to start making investments, you'll need to open a brokerage account to start placing trades.

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Opening the account is easy, but picking a broker can be the hardest part. Below, we'll take a look at two popular brokers used by millions of people, Charles Schwab and TradeKing, to see how they compare on the most important features for buy-and-hold investors.

Trading costs and commissions

The simple fact is that a fully fledged brokerage account is never truly free, but commissions have dropped considerably over time. Both Charles Schwab and TradeKing have fairly low commission prices, which vary based on the type of investment you wish to make.

Broker

Stocks/Options

ETFs

Mutual funds

Charles Schwab

$8.95 per trade + $0.75 per options contract

$8.95 per trade

$76.00 per purchase

TradeKing

$4.95 per trade + $0.65 per options contract

$4.95 per trade

$9.95 per purchase

Source: Company websites

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Check out the difference in prices in the table above. You'll notice that the difference in the cost per trade frequently amounts to just a few dollars, with mutual funds being the one column where pricing differs dramatically. However, keep in mind that these are the published prices provided by each broker. The availability of commission-free investments, volume discounts for active traders, and special offers for opening a new account can all help minimize your average cost per trade.

Commission-free ETFs and NTF Funds

Like funds? You may be in luck! Brokers increasingly offer their clients a list of commission-free ETFs and no-transaction-fee (NTF) mutual funds that they can buy and sell without paying a dime in transaction costs. The table below compares fund availability by broker.

Broker

Commission-free ETFs

NTF Mutual funds

Charles Schwab

200+ (Schwab, Guggenheim, State Street, and more)

3,900+

TradeKing

None

None

Source: Company websites.

Although Schwab certainly has more commission-free ETFs and NTF mutual funds, we note that the number of funds isn't as important as the selection of funds you have to choose from. If your favorites aren't on a broker's list, then it may be of little advantage to you.

That said, there's plenty of reason to take this into consideration. An investor who buys shares of a stock fund and bond fund each month would incur 24 transaction fees over the course of a year. Paying even as little as $5 per transaction would result in $120 in fees that many investors would be better off avoiding, if possible.

Account minimums

Both Charles Schwab and TradeKing are no-minimum brokers that will open accounts for new customers regardless of their initial deposit size. Some brokers require an initial minimum deposit of $10,000 or more, which can dissuade some beginning investors from getting started.

No-minimum brokers like Charles Schwab and TradeKing make it easy to get started. Image source: Getty Images.

Trading platform

Here at The Motley Fool, we preach and practice a buy-and-hold investing strategy. That means we invest to take an ownership stake in companies we believe will be good investments years and decades from now, not just for the next few days or weeks.

The truth is thattrading platforms aren't designed for investors like us, and we don't exactly make full use of all their capabilities. As with operating systems or political parties, personal preference plays a big part of which platform is better or worse. If it's important to you, it's worth trying them out for yourself.

But if you take the long view and trade infrequently, it's unlikely that the differences in trading platforms will be that big of a deal. Realistically, most brokerages make placing a trade as easy as typing in a ticker, number, and clicking a button on your screen.

International stocks and ADRs

Want to invest around the world? Some brokerages offer more international investments than others. The table below shows investment availability by brokerage.

Investments

Charles Schwab

TradeKing

American Depositary Receipts (ADRs)

Yes

Yes

International stock markets

Yes

No

ETFs/Mutual funds of foreign stocks

ETFs and mutual funds

ETFs and mutual funds

Source: Company websites.

Both brokers allow you to invest in ADRs and funds of foreign stocks, so the differences are small here. The big difference is the ability to buy and sell stocks listed on international markets. Only Charles Schwab offers that capability to its investors.

Schwab clients can access up to 12 foreign markets electronically, and up to 30 foreign markets through its Global Services desk. However, keep in mind that international trades are typically assessed a higher commission or fee, which can vary based on the stock exchange. (Higher commission prices and fees are typical among the few brokers that offer international stock trading.)

Research quality and tools

One of the best perks of having a brokerage account is getting the tools to research good investments. Charles Schwab offers research from its own in-house analysts, in addition to stock and fund screens, news from the wire services, and daily market reports from leading publishers and bank groups. Similarly, TradeKing provides fundamental and technical screeners, Breakfast Bell market reports before market open, live news, and access to S&P stock reports.

We're only scratching the surface here, but depending on your needs, you'll likely find plenty to like about what either broker has to offer.

Mobile app

Online discount brokers bring Wall Street to any phone or tablet thanks to widely available trading apps. Here's how users and clients of each broker rated their iOS and Android apps (as of 12/29/2016).

Broker

Apple App Store

Google Play

Charles Schwab

3.0 stars

4.0 stars

TradeKing

1.0 star

4.0 stars

Source: Relevant app stores.

The broker for you: Charles Schwab or TradeKing?

Both brokers have their own puts and takes, and depending on your needs, either could be right for you. On one hand, Charles Schwab has an impressive line-up of fee-free fund choices and international investment options. However, investors who shop for funds that aren't on its no-transaction-fee list will pay a higher commission on every trade. TradeStation boasts lower published commission prices than Schwab across the board, but doesn't offer as many free funds, or access to international stock exchanges.

Of course, what really matters is how each of these factors fit into your portfolio. To be clear: The Motley Fool doesn't endorse any particular broker, but we can help you discover the best brokerage for you. Visit Fool.com's Broker Center for a comparison of features and special offers for traditional brokerage accounts. The Fool.com IRA Center provides a comparison of brokerage services, special offers, and features with a focus on the needs of retirement investors.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.